So you just graduated from college, and now you are on your own for many things—including tax preparation. It is likely that your parents and peers will give little if any guidance on how you should go about filing your tax return. So what should you do? This short article will point out two very important portions of your tax return: how you should go about deductions, and what status you should choose when filing.
Deductions sound like a very intimidating topic. Every day we learn about a new deduction that we could claim if it applies to us. Often charitable deductions are a topic of discussion due to their social benefit, but how do all these deductions apply to you, the recent graduate? Not all will apply to you. For instance deductions such as the charitable contributions above are part of a set of deductions called itemized deductions.
Itemized deductions are made for those able to amass deductions larger than the normal standard deduction which as of 2013, are $6,100 for single individuals and $8,950 for those filing as head of household. Frankly, most recent graduates will not be able to tally up deductions close to the standard deduction for their filing status. Therefore, claiming the standard deduction is most often the recent graduates’ best move.
So what is a filing status? A filing status is, in summation, your current domestic living situation. Currently, there are five (5) different statuses but the most applicable are four (4): single, married filing jointly, married filing separately, and head of household. It is possible that any one of these statuses could apply to a recent graduate, but it is most likely that “single” applies to a majority of recent graduates.
But how are you able to define who the “head of the household” is? The head of household status applies to those persons who are not married, but nonetheless have dependents living with them. A dependent is a person that resides with the filing party for more than half of the year in which the filer provides for the dependent at least 50% of the dependent’s living expenses for such items as food, clothing, and shelter. Furthermore, the dependent individual must be a qualifying child or individual. A qualifying individual is one who is a relative, either by blood or law. Of course, there are other requirements such as the person cannot be claimed on another tax return, be US citizen/resident, earning less than personal exemption amount (3,900.00 for 2013) or meets one of the exceptions.
For a recent graduate, the foregoing makes a large difference in the amount of refund that he/she will receive from the IRS. Making sure that these two items are in order on your tax forms this tax season will insure that you have given yourself the highest likelihood of a return.